A solar power system is appealing to a lot of homeowners for obvious reasons. Environmentally friendly, lowered electricity costs and a more energy efficient home, solar panels have a lot of pluses to them. But, although they have become more affordable in recent years, solar panel systems remain a considerable expense for the average homeowner.
If you are considering a solar panel system, knowing the costs involved will certainly help in your decision making. Keep in mind however if you plan on moving in the near future it might not make sense from an investment standpoint.
One of the questions homeowners often ask is do solar panels increase the value of a home? The answer to this question depends on a lot of factors. If you ask the solar companies, they will give you a cut and dry answer that yes, they will increase the value. Sorry, not so fast! Try putting a solar system on the front of an upscale home and see what happens to the value and the difficulty in which it will sell.
The following information is based on averages in the U.S., which can give you a rough idea of what solar power systems cost. Of course, your costs will vary based on where you are in the country, the size of your house, etc. Keep the cost of solar panels in mind when deciding if there is a financial benefit to adding them to your home.
Estimating the Electrical Needs of the Home
Solar panels generate electricity, which is measured in kW. Generally, estimates for a home in the U.S. put electricity use at around 1 kW per hour (kWh). The average price for electricity is $0.10 per kWh. Since each month has around 730 hours, the estimate for the average electrical bill for a U.S. home would be $73. Keep in mind that these numbers are an average for the whole country. Electricity in Texas is cheaper than electricity in Hawaii, for instance. There are a lot of factors that could increase or decrease the base amount of electricity used. If you have an 80 inch television that stays on all day, you would use more than the average. If you have no television and cook all your dinners outside on a grill, you would use less.
How Many Panels Do You Need?
The average solar panel can generate around 10 watts/sq. ft. Some panels convert more efficiently, others less. Around a 12 percent conversion rate can be expected from each panel, which works out to about 100 sq. ft. of panels to power a home that uses 1 kWh – if the sun was shining all day and all night, 24-hours a day. Of course, the sun doesn’t shine 24-hours a day, at least in places where most people live. So you need to estimate your panel requirements based on your location.
For somewhere like Seattle, where the sun shines an average of 3 hours a day, you would probably need 800 sq. ft. (8 kW) of panels. If you were in Arizona, where the sun shines for an average of 7 hours a day, you might only need 400 sq. ft. (4 kW) of panels.
How Much Do They Cost?
The price of a solar power system will include not only the cost of the panels, but the installation and the electrical system required to prep your home for utilizing the electricity produced. The cost of solar panels is based on watt, with the average ranging from $7 to $9 per watt including installation (the cost can change based on market factors, so find the current price in your area to be sure.) At these prices, a 5 kW system could run between $25,000 and $35,000 – but you will most likely be able to get subsidies for your purchase. There are usually incentives you can get from your utility company or other sources to offset the cost.
If you were to buy a system that cost around $20,000, it could take 20 years for it to pay for itself. When you realize that it can take such a long time to recoup your investment, it is normal to feel a little hesitant. But there is hope for cheaper prices. Many manufacturers are promising cheaper panels that are not only less expensive, but more efficient. If the costs go down, that means less time before you are able to recoup your investment. The cost of electricity could go up as well, which would shrink the timeline for making your money back. Deciding between purchasing and leasing solar panels should also be a consideration.
Is It Worth It?
Choosing to install solar panels is a personal choice that only you can make. There are obvious environmental benefits, which may be a big factor for you. The financial benefits of solar systems are only clear long-term, after you have recouped your investment. Once you know what is important to you, you can choose whether solar panels are truly “worth it.” Just remember, if you think you'll be selling your home soon the return on investment will be minimal. Don't think that if you spend $30,000 on a solar panel system, you will be able to add that to your asking price. Doing so will more than likely cause your home to sit on the market.
Bill Gassett is a nationally recognized real estate leader who has been helping people move in and out of the Metrowest Massachusetts area for the past 29+years. He has been one of the top RE/MAX REALTORS® in New England for the past decade. In 2015, he was the number 5 RE/MAX agent in Massachusetts. Connect with him on Google+.
This article is outdated incorrect in many ways and should have been researched before providing such wrong information
So Russ, what solar power company do you work for?
and you? Duke energy or Edison Institute
It’s all relative to your cost of energy. In Hawaii, on my multi-million home, the system will pay for itself in about 24-36 months. Solar panels add value even to our $16-$25 million homes. Bottom line…energy is expensive in Paradise!
Great post!!
Hi, Bill,
What’s the average longevity of a solar panel system? Also, because of the cost to repair damaged panels, would solar be impractical in areas that regularly have hail storms?
Remember that if they are rented panels/systems, those costs can impact a potential buyer’s decision if you decide to sell.
Terrific article. I liked your article as well on what buyers and sellers should know about solar power systems. Most people do assume that if they add solar power to their homes the value will automatically go up. As you point out this is not the case and in some circumstances can make your property harder to sell.
I just had an estimate done by two solar companies in AZ. Even with a 12 year note, ($16,000) for a 5.4 KW sys, the monthly payment will be less than my current utility bill + the service charge by Arizona Public Service for my hookup, meter, etc. So I can save about 20 -30 dollars a month while I pay off the system. It’s still a big commitment and I haven’t made a final decision. One of the drawbacks is that the panels will be on the front side of my hip roof. I don’t think any appraiser will give me an increase in value for the sys. and I don’t believe most buyers will either.
Rather than spend money on travel and junk we don’t really need, we went into our savings and paid $30,000 cash for solar 3 years ago. Our SoCal electric bills were often more than $500/mo. Now, we pay almost nothing or sometimes we get a small credit at the end of the year. This monthly savings has improved our lives tremendously. There is no stress about setting the air conditioner at 76 rather than 79, no cooking everything on the gas grill because the electric oven is too expensive to use. No ranting because a light was left on or someone forgot to unplug the iron. Because of the ever-increasing cost of electricity, our actual payback will be quick. Family fights over electricity usage are gone. We have more money to spend on recreation without diving into more savings. The payback is about 5 or 6 years. We aren’t moving anytime soon, so it makes sense. As far as selling and getting your money back, I think a buyer may value that the house you are selling them will have zero electric bills and they might be willing to pay a little more for it because of that. We knew from the start that the more houses that go solar, the less additional resale value we would reap from solar.. But in our case, we did it for our family happiness and because it was a good investment in our future ownership of our house. It’s one of the best decisions we ever made.
I’ve had a system for just going into the third month now. My first full month with solar cut my bill by two-thirds. In San Antonio, CPS qualified companies to size the systems for just under the average historical usage to qualify for their rebate.
With tax credits (this January) my total cost was right at $12,000 with an estimated 6 or 7 year payoff (I paid cash).
I’m getting set for retirement, and minimizing the monthly is my target. Should I turn this house into another rental, I’ll ask for maybe $80 more for rent because of the system.
I want to have solar panel soon. I will surely get them soon. I want to save energy.
Great article!
Solar industry is improving nowadays.